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Vulcan Loss Narrows; Sales Down

Zacks Equity Research

Vulcan Materials Company (VMC) lost 2 cents per share in the second quarter of 2012, missing the Zacks Consensus Estimate for a profit of 6 cents per share by a wide margin. However, the loss was narrower than the prior year quarter’s loss of 4 cents as the top-line decline was offset by margin gains.

Total revenue in the quarter declined 1.1% to $694.1 million, driven by a revenue decline in the Aggregates segment. However, revenues were slightly higher than the Zacks Consensus Estimate of $692 million.

The consolidated gross margins improved 220 basis points in the quarter on the back of lower cost of sales due to improved productivity. Total Selling, Administrative and General (:SAG) expense declined 16% in quarter to $62 million due to the company’s cost reduction efforts. Adjusted EBITDA was $127 million, up 8% from the prior-year quarter, driven by improved gross margins and lower SAG costs.

Segment Results

Aggregates: Revenues declined 1.5% to $471 million in the quarter due to volume declines and an unfavorable geographic mix. Aggregates shipments declined 1.2% from the prior year. Gross profit, however, rose 8.7% to $111.8 million as the revenue decline was offset by improved productivity and cost reduction initiatives.

Concrete: Revenues were up 4.9% to $103.1 million. The segment recorded a gross loss of $9 million, wider by 0.09% from the prior-year quarter due to unfavorable geographic mix.

Asphalt Mix: Revenues declined 6.5% to $103.7 million. The segment recorded a gross profit of $5.2 million, down 37.4% year-over-year, mainly due to higher liquid asphalt costs.

Cement: Revenues surged 20.8% to $20.3 million. Gross loss was recorded at $2.04 million, wider by 54.5% from the prior-year quarter.


During the second half of fiscal 2012, Vulcan expects $325 million of adjusted EBITDA, an increase of $102 million from the second half of the prior year. The company expects SAG costs to be $260 million and capital spending to be $100 million in fiscal 2012.

The company expects that demand for the Aggregates segment to improve due to increases in private construction activity and stability in highway funding. Total Aggregates shipments are expected to be flat to 2% higher for the full year 2012, owing to the sale of the Indiana operations in 2011. The company expects improved geographic mix of shipments for the second half of 2012.

Currently, we have an Outperform recommendation on Vulcan Materials Company. The stock carries a Zacks #1 Rank (a short-term ‘Strong Buy’ rating).

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